Buying a car: beware of this financing trap! Thousands of euros are at stake

Buying a car: beware of this financing trap! Thousands of euros are at stake

many car dealerships advertise zero percent financing on new cars and young used cars. However, this is often only apparently cheap. If you choose a different financing option instead, you can save around 5 percent on your car 000 euros. This is shown by calculations of the comparison portal verivox.

rebate beats financing

the catch in the car dealers’ appealing-sounding offer: "there is no such thing as genuine zero-percent financing", says verivox managing director oliver maier. "Zero-interest offers at the dealership are subsidized by the dealer or manufacturer to boost sales." there is nothing wrong with it for now. But since they already subsidize the financing, many dealers or manufacturers don’t want to give discounts on top of that. And at this point, the model falters.

If you pay cash, you can negotiate a substantial discount – and get a new car at a lower price.

An example

even if you negotiate a 4.85 percent cash discount at the dealership, you’ll have the same financing costs with a low-cost installment loan as with zero-percent financing. This means: as soon as your discount is above 4.85 percent, you save on the purchase by installment credit.

Cash discounts of more than 4.85 percent on new car purchases are by no means uncommon. The discounts offered by new car brokers on the internet are even higher: according to the center automotive research (CAR), they amount to prof. Ferdinand dudenhoffer the average dealer discount here is currently 17.9 percent.

This calculation shows the savings potential

On average, car buyers spend 36.340 euros for their new car, the average online discount is 17.9 percent (see above). This is what they pay with each financing model:

  • With zero-percent financing without discount 36.340 euros
  • With installment credit and 4.85 percent discount as well 36.340 euros – discount and interest cancel each other out
  • With installment credit and 17.9 percent online discount 31.355 euro

In the third variant, you can save exactly 4 percent with an installment loan.985 euro. to keep up, your local dealer would have to give you almost 14 percent off – on top of zero percent financing.

zero-percent financing without discount financing with installment loan and cash discount installment loan and purchase via new car agent
discount / 4.85 percent 17.9 percent
purchase price 36.340 euro 34.579 euro 29.835 euro
term 60 months 60 months 60 months
effective interest rate 0,00 percent 1,99 percent 1.99 percent
total cost 36.340 euro 36.340 euro 31.355 euro

Banks give cheap car loans

"Because the vehicle is collateral, some banks grant car loans at a particularly favorable interest rate", says maier. He recommends the following procedure before buying: "negotiate the highest possible discount first, no matter if you buy online or from a dealer. then look for an independent loan with the best possible interest rate." this is the way to get the most out of your investment.

This is how it was calculated
an effective interest rate of 1.99 percent was used to calculate the financing costs – the most favorable fixed interest rate in the verivox car loan comparison. All of the bank’s customers receive this uniform interest rate.

balloon financing not recommended

Car buyers should also carefully examine so-called balloon financing. It promises very low monthly installments – but at the end of the term you have to make a high final installment.

  • Hidden cost advantage:here the e-car is much cheaper
  • Drastic increase:this is how expensive car insurance gets in old age
  • Three exceptions to rule:traffic light red! When can I still drive?

What’s more, the ongoing installment payments only partially cover the depreciation of the car. There are risks. "If paint damage or signs of use reduce the value of the car, it cannot always be sold at the price of the final installment", says maier. "Then the borrower has to pay more money out of his own pocket to pay back the loan. With a simple installment loan, the vehicle is fully paid off at the end of the term and belongs to you."

interest also accrues on the final installment over the entire term of the loan. This makes the balloon expensive.

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